Ida’s aftermath

The oil market was focused on the Ida hurricane making landfall yesterday, strengthening to a Category 4 hurricane with winds reaching 240 km/h in key areas of the US petroleum complex (especially the Port Fourchon and LOOP complexes in Louisiana, delivering 17% of US crude supply) and knocking out power supply across Louisiana. With 1.7 mb/d of offshore crude production shut-ins (95% of the total capacity) and more than 800 kb/d of refining capacity ramped down in ahead of the hurricane, the US balances are getting tighter for refined products, and potentially even for US crude markets, despite already losing 4.5 mb of supply between the 27th and the 29th of August. Amid these controlled shutdowns, the Colonial pipeline, bringing supply coming from refineries in Texas and Louisiana to the East coast, announced the interruption of its operation yesterday.

The US will potentially need to strengthen their refined product imports, explaining the 3% rally in gasoline and heating oil futures, delivered in NY harbour. WTI futures declined more than ICE Brent futures, as refining crude demand will be choppy for early September, feeding through October’s contracts.

source: EIA

On Wednesday, OPEC+ members are gathering to reconsider their production path, as part of their usual monthly meetings. We expect little changes from their initial production path, as the US and Mexico’s supply experience sizable outages, Libyan production might be at risk and the delta variant is peaking globally. The Libyan oil complex has also been affected by budget issues, with the Arabian Gulf Oil Co. – a subsidiary of the National Oil Corporation – threatened to cut production without incremental funding.